Akzo Nobel, the world’s biggest paint company, is preparing for a deep and prolonged recession similar to the 1930s with recovery taking “many years”.

The Dutch industrial giant, which owns the Dulux brand, fears that a second downturn could occur next year if further problems emerge in the financial sector.

The group yesterday reported better than expected profits for the second quarter of €370 million (£317 million) and a signal that the company was maintaining its margins after a vicious round of cost-cutting sent Akzo shares climbing almost 10 per cent.

However, revenues fell 10 per cent in the quarter and the company offered little comfort yesterday that the steep decline in demand with volumes falling 16 per cent would be remedied soon.

In an interview with The Times, Hans Wijers, Akzo’s chairman, said that he did not believe in a rapid “V-shaped” recovery.

“The road to recovery will be a long and volatile road and it will take many years until we are back in terms of volumes where we were in mid-2008. It could be we see some growth in the second half of 2009 and then we drop downwards in 2010.”

The Akzo chief said he was not convinced that the financial system had been stabilised and he was worried about the ability of governments to cope with further trouble in the banking system.

Mr Wijers suggested that rising unemployment and higher taxes would delay recovery and he attributed the recent euphoria in the markets over “green shoots” to lack of experience.

He said Akzo would meet its target of savings of €540 million which included €340 million in merger benefits from the ICI takeover and a further €200 million. The company has extended the cost-cutting to head office with 100 layoffs among top management. Internal penny-pinching helped to maintain Akzo’s profit margins which at the operating level were up slightly at 14.4 per cent despite the steep drop in revenues.

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